The Conservative-dominated cross party committee has concluded that the scheme reforms introduced in 2007/8 will keep the costs of public sector pensions stable at 1% of GDP – generating more than £67 billion in savings to the taxpayer over the next five decades.

This more than suggests that the cost of the current schemes is affordable to the taxpayer.

As the committee points out, the current reform process could undermine these savings. Devaluing pension savings in a context of opaque costings will threaten both the savings in place and the future participation levels. The latter threat will be intensified if the chancellor persists with his plan to increase employee contributions to an unsustainable level.

As PAChighlight, the cost of public sector pensions cannot be viewed in isolation. If public sector workers have insufficient income in retirement because their pensions are cut or they are priced out of schemes, costs appear in other parts of the nation’s balance sheet.

Expenditure on welfare benefits increases, as will pressure on local authority and NHS services. Currently government is ignoring this, an approach that could well cost the taxpayer and society far more in the long term than will ever be saved in short term savings.

Many questions remain in regard to the government’s intentions for the reform of public sector pensions. For instance, the cap and share arrangements that, as the PAC report makes clear, will generate 60% of the savings over time, have been delayed by government, who took the decision to suspend the actuarial valuations of the schemes, with no discussion and little in the way of explanation.

Even the Hutton report (pdf) acknowledged that a cost sharing mechanism, as with other reforms, should be transparent and evidence based; the government needs to take note – existing reforms will generate savings only if they are allowed to operate.

No one will benefit if the planned savings are lost because the government removes the framework for achieving them.

18 Responses to “Report suggests cost of current public sector pension schemes is affordable”

William

I thought this was an ‘evidence based website’.1.If public sector pensions are so affordable(thankyou for decimating my private sector pension),how come John Ralfe has been saying the opposite for 10 years?. Plan B.The electorate voted for Plan A,so wait to the next election.3.Tax and spending, a la Michael Burke,nice selective graph,check your figures out with the OBR.

Rob Brookes

Why should the state only pay decent pensions to public servants. And why should the state pay more to those who are already earning more, ie wage related pensions to public servants with higher incomes. This seems to me blatantly unjust. We should all have a decent basic pension and if we want a higher income as pensioners it is up to the individual to make his own non subsidised and non tax deductable arrangements to do that.
Rob

Marienbad

3. (Rob) It is not the fault of state employees that private sector pensions are poor. As for non-tax deductable, it favours the rich, so I doubt that will change any time soon.

Further, state pensions are not subsidised. State employees are paid by the state and are entitled to put some much aside into a pension. Please remember, there are an awful lot of low paid state employees (care workers, binmen, dinner ladies etc) who only get about £6 p/h, and pay say 5% per month into a pension. Please explain what you think is wrong with this?

Rob Brookes

What I think is wrong with this is that it is that for the majority of low income earners they get just the basic pension when they retire. Since the state (mostly from taxation of the working which is how it should be imo.) pays for the basic pension it would make much more sense to me that it was open and honest and paid a basic pension that we could all accept as a reasonable income. Then as I said if individuals want a higher income in their pension years they make their own arrangements. Also I do not understand why higher income earners within the state should also get a higher state funded pension.
Maybe subsidy is the wrong word but though public service workers do pay 5% of their salary towards their pension according to the Public Sector Commissions report //www.google.co.uk/url?sa=t&source=web&cd=7&sqi=2&ved=0CFIQFjAG&url=http%3A%2F%2Fwww.public-sector-pensions-commission.org.uk%2Fwp-content%2Fthemes%2Fpspc%2Fimages%2FPublic-Sector-Pensions-Commission-Report.pdf&rct=j&q=public%20service%20workers%20pensions%20%20input%20from%20local%20authority%20uk&ei=L0riTailIsGFhQe3vYTzBw&usg=AFQjCNGo8tnYKCwyBk2Y0kEBDBbt8XlwZA&cad=rja they estimate the public service workers pension is worth 40% of their salary, the extra paid almost surreptitiously by the state. ( this may not be accurate I admit but do you have accurate figures as to what say a near minimum wage cleaner or a higher paid teacher would receive as a public service pension). I have no objection to paying additional pensions to public servants who were on a low wage as I would guess that would give them no more than a reasonable income in their retirement years and though I think we should all expect a similar amount as a right when we retire that is probably not going to happen soon. I think it is wrong to support the payment of the higher public servant pensions.
Rob